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Skill-Biased Technological Change in Denmark:
A Disaggregate Perspective*
In this paper, we provide an industry-level analysis of skill-biased technological change
(SBTC) in Denmark over the last two decades. The analysis shows that SBTC has varied
considerably across industries, and traditionally large Danish industries have experienced
relatively less SBTC. This may partly explain why wage inequality between skilled and less
skilled has risen less in Denmark than in other countries. We also find that SBTC has been
concentrated in already skill-intensive industries. This contains important information about
future labour requirements, as the relative importance of these industries must be expected
to grow, thereby reinforcing the shift in demand for skilled labour.
JEL Classification: J24, J31, L6
Keywords: skill-biased technological change, Danish industries

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This paper examines the implications of that workers may not be able
to estimate their true costs of acquiring skills. Consequently, too few
workers may acquire skills. This allows for the possibility that subsidizing
education is welfare improving. Furthermore, if the presence of skill-biased
technological shocks increase unemployment, this may explain why the
market it-self cannot respond to this by making it sufficiently attractive
to acquire skills. Consequently, the trade-off in-between subsidizing education
and thereby reducing unemployment and optimizing welfare may
be eliminated. We analyse this issue in a simple educational model and
next in a search equilibrium model including a skill choice decision.
Keywords: Education, subsidies, efficiency, unemployment.
JEL codes: I20, J64.

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We find that the main featues of labor policy across OECD countries can be explained by a simple general equilibrium search model with risk neutral agents and a government that chooses policy to maximize a social welfare function. In equilibrum, policies are chosen to optimal redistribute income from advantaged to disadvantaged workers. A worker can be disadvantaged in the sense that they may have less ability to aquire and utilize skills in the workplace. The model explains why passive benefits tend to fall and active benefits tend to increase during the course of unemployment spell. The model also explains why countries that appear to pursue equity spend more on both active and passive labor market programs.

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This paper studies the impact of outsourcing on individual wages. In contrast to the standard approach in the literature, we focus on domestic outsourcing as well as foreign outsourcing. By using a simple theoretical model, we argue that, if outsourcing is associated with specialization gains arising from an increase in the extent of the market for intermediate goods, domestic outsourcing tends to increase wages for both unskilled and skilled labor. We use a panel data set of workers in Danish manufacturing industries to show that domestic and foreign outsurcing affect wages as predicted by the theory.
Keywords: Outsourcing, Comparative advantage, Specialization, Wages.
JEL Classification: F16, J31, C23.

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This paper introduces the concept of a steepest ascent tariff reform for a small open economy. By construction, it is locally optimal in that it yields the highest gain in utility of any feasible tariff reform vector of the same length. Accordingly, it provides a convenient benchmark for the evaluation of the welfare effectiveness of other well known tariff reform rules, as e.g. the proportional and the concertina rules. We develop the properties of this tariff reform, characterize the sources of the potential welfare gains from tariff reform, use it to establish conditions under which some existing reforms are locally optimal, provide geometric illustrations and compare welfare effectiveness of reforms using numerical examples. Moreover, being a general concept, we apply it to the issue of market access and examine its implications. Overall, the paper’s contribution lies in presenting a theoretical concept where the focus is upon the size of welfare gains accruing from tariff reforms rather than simply with the direction of welfare effects that has been the concern of the
literature.
JEL code: F15.
Keywords: Steepest ascent tariff reforms; piecemeal tariff policy; welfare; market access; small open economy.

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This paper examines the macroeconomic effects of youth unemployment programmes in the form of vocational training (YUPs), developing a two sector general equilibrium model featuring matching frictions and worker-fi rm wage bargaining for skilled workers. Unskilled sector wages are indexed to skilled sector wages. Workers differ with respect to ability, having importance for the young worker s skill decision. Furthermore, a young worker may be offered vocational training through YUPs. The total number of skilled workers is therefore determined by these two channels and the interaction between them. We focus on the impact of of YUPs on skill division, unemployment distribution workers and aggregate unemployment.
Keywords: Skill acquisition, search,
JEL classi cations: J18 J38 J68

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Abstract
Lund (2002a) showed in a CAPM-type model how tax depreciation schedules
affect required expected returns after taxes. Even without leverage higher tax rates
implied lower betas when tax deductions were risk free. Here they are risky, and
marginal investment is taxed together with inframarginal in an analytical model
of decreasing returns. With imperfect loss offset tax claims are analogous to call
options. The beta of equity is still decreasing in the tax rate, but increasing in the
underlying volatility. The results are important if market data are used to infer
required expected returns, and in discussions of tax design.
Keywords: Corporate tax, depreciation, imperfect loss offset, decreasing returns,
cost of capital, uncertainty

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In recent years, venture capital has increasingly become a factor in the
financing of new firms. We examine how the value of mature firms determines
the incentives of entrepreneurs to start up new firms and of venture capitalists
to finance and advise them. We examine how capital gains taxes as well as
subsidies to start-up costs of new firms affect venture capital-backed
entrepreneurship. We also argue that dividend and capital gains taxes on
mature firms have important consequences for start-up firms as well.
JEL Classification: D82, G24, H24 and H25
Keywords: double moral hazard, entrepreneurship, taxes and venture capital

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We examine how a multinational’s choice to centralize or de-centralize its
decision structure is affected by country tax differentials. Within a simple model that emphasizes the multiple conflicting roles of transfer prices in MNEs — here, as a strategic pre-commitment device and a tax manipulation instrument —, we show that decentralization is preferred in case of small tax differentials, whereas centralization can be more profitable, when tax differentials are large. In essence, the organizational flexibility of MNEs is triggered by the scope for tax minimization. Our analysis allows for both commitment and non-commitment to transfer prices, and for alternative modes of competition.
Keywords: Centralized vs. de-centralized decisions, taxes, transfer prices, MNEs.
JEL-Classification: H25, F23, L23.

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This paper provides an assessment of Greenland's tax system and contemplates changes that may be
undertaken in the future to prepare for greater economic self-reliance and for the country's participation
in the wider world economy. At the outskirts of Europe, Greenland is an autonomous part of the
Danish kingdom, though currently not a member of EU. However, its cooperation with European
countries and its dependency on international trade renders it necessary for the tax system in Greenland
to be attuned to developments in the rest of the world. Drawing on a thorough international benchmarking
analysis of Greenland's tax system, the paper's special focus will be on the corporate tax system
and its interplay with personal taxation, as well on as the system of import duties. In particular, we
carry out computations of effective marginal and average corporate tax rates, as well as average effective
tax burdens on consumption, labour income and capital income, and compare these to similar
measures for EU countries. In addition, we outline how Greenland's economic policy in other areas
interferes with tax policy. Especially fishery regulation, management of government-owned companies,
and housing policy have major implications for the tax system.
Key words: international benchmarking, effective tax rates, Greenland
JEL: H20, H25

We study aggregation - or sample frequencies - of time series, e.g. aggregation from weekly to monthly or quarterly time series. Aggregation usually gives shorter time series but spurious phenomena, in e.g. daily observations, can on the other hand be avoided. An important issue is the effect of aggregation on the adjustment coefficient in cointegrated systems. We study only first order vector autoregressive processes for n dimensional time series Xt, and we illustrate the theory by a two dimensional and a four dimensional model for prices of various grades of gasoline.

Asymmetric information and fear of acquiring a 'lemon' may explain the
paucity of foreign investment in emerging market economies. If investors
are uncertain about the profitability of investments, intrinsically inefficient,
temporary partnerships or joint ventures may serve as mechanisms through
which information is transmitted. Temporary partnerships with joint in-
vestments by the domestic firm and the foreign investor, together with a
buy-out option to the investor, can be used to separate good and bad invest-
ment prospects in equilibrium. However, non-revealing equilibria may exist.
Implications for foreign direct investment are traced and briefly related to
the experience of transition economies.
Keywords: investment, complementary assets, partnerships, joint ventures
and licensing, costly signaling
JEL: D8, F2, L14, O12